Broad Oak: your emotional support animal

Tuesday, April 17, 2012

Spanish credit now 10th worst globally; UK and USA recovering?

According to CMA Datavision's Q1 report on the sovereign credit insurance market, out today, Spain has just entered the top 10 most risky countries, with a 32% chance of default within five years. Far worse is Portugal, with a 60% 5-year default risk (beaten only by Cyprus, which is a new inclusion in CMA's tables).

More surprising is the market's favourable assessment of the USA, which has recovered its insurance-implied AAA rating, and the UK, now listed as the 6th least risky country. It would seem that the credit insurance traders have bought the good news stories, in the face of continuing pessimism from a number of other economic commentators.

Norway, last quarter the only nation to have an implied AAA rating, retains pride of place, followed by the USA, Switzerland and Sweden with their newly reinstated triple-A grades.

Is the market's optimism at the top end justified, or mistakenly short-sighted?

INVESTMENT DISCLOSURE: None. Still in cash (and index-linked National Savings Certificates), and missing all those day-trading opportunities.

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